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The Sinocism China Newsletter 06.05.16

"Sinocism is the Presidential Daily Brief for China hands"- Evan Osnos, New Yorker Correspondent and National Book Award Winner

THE ESSENTIAL EIGHT

1.U.S., China Trade Barbs Over South China Sea at Shangri-La Dialogue – WSJ “The timing of this conference was very sensitive for China,” coming just ahead of the tribunal ruling, said Bonnie Glaser, senior adviser for Asia at the Washington-based Center for Strategic and International Studies. “The Chinese were very much on the defensive.” A senior Chinese delegate admitted as much, saying they face an uphill task in overcoming foreign “propaganda” against Beijing. “International public opinion is still being controlled by the Western world,” said Maj. Gen. Jin Yinan, a professor at China’s National Defense University. “In such unfavorable circumstances, we must still do our best to use public forums to explain China’s position.” // no sign of any sort of solution, if anything further divergence and hardening of positions, grim

Related:China refutes U.S. defense secretary’s China “self-isolation” claims – Xinhua A high-ranking Chinese military official Saturday refuted U.S. Defense Secretary Ashton Carter’s “self-isolation” claims about China. “Carter’s claims are incorrect and do not accord with the actual situation,” Guan Youfei, director of the Office for International Military Cooperation of the Chinese Central Military Commission, told the media. Guan’s comments came after Carter’s claims at the ongoing Shangri-La Dialogue that China’s military activities in the South China Sea would isolate itself. Guan said the United States should learn lessons from the wars it had waged in the Asia-Pacific region after World War II and play a constructive role in the region.

Related:Kerry warns Beijing over air defense zone for South China Sea | Reuters “We would consider an ADIZ…over portions of the South China Sea as a provocative and destabilizing act which would automatically raise tensions and call into serious question China’s commitment to diplomatically manage the territorial disputes of the South China Sea,” Kerry said during a visit to Mongolia. // so Obama administration appears to have set red lines around an SCS ADIZ and any PRC moves to reclaim Scarborough Shoal/Huangyan Island? Expect Beijing to test if they are red dashed lines

Related:Carter to visit Beijing, increase US-China security exercises – Pacific – Stripes At a press briefing in Singapore, U.S. Pacific Commander Adm. Harry Harris said the exercises reflect a strategy of “cooperation where we can – but we have to confront [China] if we must,” Harris said. Harris said despite increased concern over China’s militarization of the South China Sea, “We’ve seen positive behavior in the last several months with China. Every now and then … you’ll see an incident in the air that we may judge to be unsafe – but those really over the course of time are rare.” “We want to cooperate with China in all domains as much as possible,” Harris said. As part of the White House’s “Pacific pivot,” Carter has visited the region five times in his 16 months in office, making it a top priority to shore up key alliances in response to a rising China.

Related:China urges U.S., Japan to stop pointing fingers on South China Sea – Xinhua “Countries from outside should honor their commitments and not make irresponsible remarks on issues involving territorial sovereignty,” Foreign Ministry spokesperson Hua Chunying said in Beijing in response to remarks of U.S. Defense Secretary Ashton Carter and his Japanese counterpart Gen Nakatani at a security summit in Singapore. According to a press release from the ministry, during the Shangri-La Dialogue on Saturday, Carter and Nakatani talked about the South China Sea issue and hurled unreasonable accusations at China. “We have noted relevant remarks. They were mostly repeating their old tunes, which have no fact in them and are full of groundless accusations against China’s legitimate construction activities on relevant islands and reefs.” Hua said.

Related:The Scholar’s Stage: China Does Not Want Your Rules Based Order Observers of Chinese affairs have come to recognize two uncomfortable truths. The first is that China is a growing power whose might will continue to grow in every dimension we can measure for decades. The second is that the Chinese system of government is a fundamentally illiberal one, and the system of international relations the leaders of this system prefer reflects their illiberalism. These two things are not determined in the stars; either may change, and may change quite suddenly. But Americans will be better served if we plan as if both of these truths will remain true to the end of our lives. This is not what we have been doing. For the most part Americans were able to accommodate themselves to the first of these realities by pretending that the second was not true. China could become more powerful, we said, because it will not be illiberal for long. After all, on this Earth the arc of history bends towards justice. Those on the ‘wrong side’ of history do not last long. How can the illiberal hope to endure? Last spring it finally sunk in. Chinese illiberalism not only can endure, it is enduring. The old consensus cracked apart. No new consensus on how to deal with China has yet formed to take its place. // expect that any possible compromise by the US would be seen as and used by the PRC as more proof the US is a paper tiger, and be used by Beijing as another wedge between the US and its allies in the region. Clearly part of the PRC’s strategy here is to demonstrate to the other countries in the region that the US is an unreliable ally. Compromise that acknowledges and legitimizes China’s recent actions in the region would only serve to prove that point for the PRC.

2.U.S.-China Talks Set to Open With Fresh Concerns Over Beijing’s Sea Claims – WSJ New developments concerning North Korea will represent another source of strain at this week’s talks. The U.S. and China partnered earlier this year to enact tough sanctions on Pyongyang in response to continued arms and nuclear tests. But in a move that will add to the tension between the two powers, Washington took additional steps last week to further isolate North Korea from the global financial system that could bring Beijing and Washington into direct economic conflict. Pyongyang’s biggest trading partner—China—likely will feel the effects. “China has the ability to both create pressure and use that as a leverage that is a very important part of global efforts to isolate North Korea and get North Korea to change its policies,” a senior Treasury Department official told reporters in Seoul, where Mr. Lew stopped before heading to the talks. The official said Mr. Lew and others would urge China to up the pressure on Pyongyang to denuclearize. // hope this round of the S&ED does not disappoint the already low expectations…be wary of any hype around Bilateral Investment Treaty breakthroughs, would be nice if it happens but think a near impossibility in the current political climates in both countries

Related:Treasury’s Lew: China pause on reforms would have ‘very bad consequences’ | Reuters Lew, in an interview with Reuters in Seoul, said he would “keep the pressure” on Chinese officials during talks in Beijing next week to stick to their reform commitments and execute pledges to reduce excess industrial capacity that is distorting world markets. China faces diminished economic prospects in the medium and long term if it fails to continue its reforms, Lew said. “Frankly, if China takes a time-out or a step back on the reform agenda, that will have very bad consequences for China’s economy and it will flow over and not be good in terms of our bilateral economic relations,” Lew said.

Related:Commentary: 2016 China-U.S. dialogue is of “quintet” significance – Xinhua The eighth Strategic and Economic Dialogue (S&ED), which will be held in parallel with the seventh High-Level Consultation on People-to-People Exchange (CPE), is of “quintet” significance as it takes place in a crucial year in which the United States is holding presidential elections and China is to host the Group of 20 (G20) summit.

Related:China, U.S. exchange views on maritime security, military relations – Xinhua The strategic security dialogue, co-chaired by Chinese Vice Foreign Minister Zhang Yesui and U.S. Deputy Secretary of State Antony Blinken, was attended by military and foreign affairs officials from both sides. The two sides discussed security issues relating to sovereignty, maritime interests, the Internet, space and military relations. They agreed that the two sides should continue dialogue and communication on security-related issues, enhance strategic trust and cooperation, properly handle differences, and push for a stable and cooperative China-U.S. strategic security relationship.

3.US Won’t Back Off On Korean Missile Defense, South China Sea: SecDef « Breaking Defense First, this month, South Korea and the US will probably announce the deployment of an American THAAD missile defense system to the peninsula. China has objected that a THAAD battery could potentially shoot down planes in Chinese airspace, not just North Korean missiles. Carter told the press repeatedly that “this is an alliance decision” about self-defense– in other words, Beijing shouldn’t worry and doesn’t get a vote. This is, after all, self-defense and the decisions of two treaty allies.

4.China’s Youth Think Tiananmen Was So 1989 | Foreign Policy It’s also not true that these five have been so exposed to state media that they lack the ability to think for themselves. All five have degrees from elite universities; they all have either studied, traveled to, or lived in other countries. But young people in China today are defined by two major characteristics: caution and ambition. Cui, a young auditor working for accounting firm Ernst & Young, told me the anniversary “isn’t directly related to me, or to my life. I don’t know any young people around me who care about the June fourth anniversary either.” Instead, Chinese youth “think about how to set our roots in the big cities and grab a better position for ourselves in the future. China is still developing fast, and the opportunities to have a better life are now or never,” Cui explained. “Who wants to risk losing everything we have achieved for a vague dream?”

5.U.S. Subpoenas Huawei Over Its Dealings in Iran and North Korea – The New York Times The United States Commerce Department is demanding that the company, based in the south China city of Shenzhen, turn over all information regarding the export or re-export of American technology to Cuba, Iran, North Korea, Sudan and Syria, according to a subpoena sent to Huawei and viewed by The New York Times. The subpoena is part of an investigation into whether Huawei broke United States export controls.

Related:China’s Huawei Coy About Its Ties to Israeli Firm – WSJ For the past seven years, Huawei has been developing technologies, some potentially sensitive, through a locally registered company called Toga Networks Ltd., according to former and current employees of both companies.

7.Chinese students ‘brainwashed by western theories’, say scholars – FT.com He Ganqiang, a retired economics professor at Nanjing University of Finance and Economics and one of the letter’s authors, said they had written the letter because “the westernisation of economics was one of the reasons for the Soviet Union’s collapse”. // this will help with reform…then again, how would a Marxist solve a debt problem?

8.抗美援朝电视剧《三八线》上映 刘源任总顾问新闻腾讯网“The 38th Parallel”, first TV series on China fighting the US in the Korean War (known in the PRC as “War to Resist U.S. Aggression and Aid Korea”, Liu Yuan is chief advisor to the film…don’t assume Xi et al don’t just hate the US in their bones given everything they learned growing up // “1950年6月25日凌晨，分裂的朝鲜半岛爆发了战争。次日，美军公开参战，致使朝鲜半岛的内战陷入国际化。6月27日，美国总统杜鲁门命令美国第七舰队开进中国台湾海峡，武装组织中国统一。1950年8月，美军飞机频繁侵入我领空，疯狂轰炸扫射，进行军事示威。” 电视剧《三八线》的故事在这一段旁白中展开，这是首部以抗美援朝为题材的电视剧，以鸭绿江边两个渔民的战争经历为切入点，再现了抗美援朝战争的跌宕起伏。

BUSINESS, ECONOMY AND TRADE

China’s Rising Home Prices Could Bring Clampdown | Mingtiandi “We believe tightening in policy measures could be targeted at cities with strong price growth, but will not be applied uniformly nationwide. Policies will remain supportive in lower-tier cities, where property prices remain sluggish,” said Moody’s vice president and senior credit officer Franco Leung said in a statement. According to data released last week by the China Index Academy, the number of cities recording an increase of 5 percent or more during May rose to 17 cities from 14 during June. Larger cities including Shenzhen, Shanghai, Nanjing and Wuhan experienced robust growth with Shenzhen registering a 63.4 percent year-on-year gain followed by Shanghai at 34.2 percent.

China Toxic Debt Solution Has One Big Problem – Bloomberg On paper, China’s latest effort to rid its banks of bad loans looks sensible. By packaging the debt into securities, lenders hope to unload them onto risk-hungry investors, a potential win-win solution that garnered praise from billionaire Wilbur Ross. But if the first deals in this 50 billion yuan ($7.6 billion) program are any guide, the whole exercise may end up just shuffling bad debt between banks, doing little to improve the health of China’s financial system as a whole.

Goldman Sees Rising Risk of China’s Yuan Repeating January Rout – Bloomberg “We shift to an outright negative view” on the yuan, strategists led by Robin Brooks wrote in a note Thursday. As the People’s Bank of China guides the yuan lower against the dollar, “the risk is that this re-ignites capital flight in the same manner it did in August (during the mini-devaluation) and around the turn of the year,” they said. // Fed not raising rates would not help this call, GS published this the day before very bad US job numbers

Hedge Fund Adviser Polk Turns Optimistic on China, for Now: Q&A – Bloomberg Andrew Polk has told clients for years that China’s growth is slower than they think and its problems more deeply entrenched than they realize. So he’s feeling a tad uneasy about turning more optimistic these days. “I hate to seem too sanguine, but in the short-term time horizon things look pretty good,” says Polk, Beijing-based head of China research at Medley Global Advisors, which advises hedge funds and other institutional investors. “It’s hard for me to see the blowup that people are expecting.”

SEC.gov | SEC Halts EB-5 Scheme Stealing Investments in Cancer Center According to the SEC’s complaint unsealed today in federal court in Los Angeles, Charles C. Liu and Xin “Lisa” Wang raised $27 million for the proton therapy cancer treatment center from 50 investors in China through the EB-5 immigrant investor program. They touted in promotional materials that the project would create more than 4,500 new jobs and have a substantial impact on the local economy while giving foreign investors an opportunity for future U.S. residency. But presently there is no construction at the proposed site after more than 18 months of collecting investments. Liu meanwhile has transferred $11 million in investor funds to three firms in China and diverted another $7 million to his and his wife’s personal accounts.

China’s new reserve calculation rules to smooth liquidity – Xinhua The latest adjustment to the calculation of the reserve requirement ratio (RRR) for bank by China’s central bank will help smooth liquidity and facilitate the offshore renminbi market, according to a research note. The People’s Bank of China announced Friday that as of July 15, the RRR calculation will be based on the average of their daily outstanding deposits, rather than the deposit level at the date of assessment.

Piecemeal Funds Raise Retail Investor Risks-Caixin Slice and sell. That’s the simple formula for a business strategy popularized in recent months by Chinese fund managers whose retail investor clients are clamoring for high-yield products. But securities regulators say some managers may be violating financial industry rules by selling retail investors small slices of private funds linked to stock market listing projects and other relatively risky fundraisers. Only wealthy individuals and institutional investors with strong risk controls are generally supposed to participate in the kinds of private fundraisers being sliced and sold.

Daughter of Former Security Chief of Shenzhen Tried for Graft-Caixin Jiang Dandan, 31, the daughter of Jiang Zunyu, who headed the party’s Politics and Law Committee in the southern city, was accused of taking 910,000 yuan in bribes together with her father, prosecutors said. Jiang Zunyu stood trial at the same court on May 16 and was charged with taking more than 70 million yuan in bribes between 1996 and 2014, court papers from his trial show.

US professor bashed for views that China’s reform is stagnating – Global Times In his latest article for The New York Times, David Shambaugh, a professor of political science and international affairs at George Washington University and author of over 30 books on China, showed his disappointment over China’s reform, saying that “…The regime abandoned relative liberation, since then, atrophy has accelerated. This does not mean that China is about to collapse, but it does mean that China is now stagnating, relatively speaking.”

Book on Xi’s prosperous society remarks published – Xinhua The book, published by the Central Party Literature Press, is divided into seven subjects, including one outlining how the campaign will help the nation realize the Chinese dream, the great rejuvenation of the Chinese nation. The book contains excerpts from more than 130 speeches, statements and written instructions by Xi between Nov. 15, 2012 and March 10, 2016. Some of the materials in the book are being published for the first time, according to a press release issued by the publisher

FOREIGN AND DEFENSE AFFAIRS

Beijing’s control over Chinese-language media more pressing than Fairfax China Daily inserts what I am really concerned about Beijing’s effort to control and shape overseas Chinese-language media. This is a hidden disease, largely invisible to Australian public and English-speaking population. But it does have impact on a sizeable and growing Chinese-Australian community and especially new migrants and students from mainland China. Once again, thanks to excellent work from John Fitzgerald, we understand the scale and gravity of this issue. Beijing has managed to penetrate and co-opted a large number of Chinese language media outlets. China Radio International is even using a Melbourne Chinese community radio station CAMG as a front to set an extensive international network of Chinese and foreign language propaganda outfits.

President Trump would hand the world to China – The Washington Post Trump’s call to “Make America Great Again” is incoherent because it is accompanied by inward-looking, reactive policies. Like Trump’s own businesses, it’s more a franchising operation than a plan for real investment and growth. Trump may indeed have a formula for greatness — but the “winner” in this story would likely be Beijing.

China, Explained | Foreign Policy Shanghai-based Sixth Tone is a sister publication to state-backed digital outlet The Paper, sharing both its resources and its state-owned parent company, Shanghai United Media Group, which provided about $4.5 million of Sixth Tone‘s initial funding. And as a publication based in China, it is subject to strict censorship. Many Western readers approach all media with deep skepticism, and China watchers in particular are highly sensitive to anything that smacks of censorship or self-censorship. How will Sixth Tone make its articles appealing to a cynical Western readership without crossing party lines? // the original editor in chief and ceo have both already resigned and been replaced…

China’s foreign minister demanded meeting with Justin Trudeau – The Globe and Mail “The Chinese probably push for more than any other other state. Not only do they have all the vanity of a big country, but they also have amazing insecurity. And that’s a very lethal combination,” said David Mulroney, who served as Canadian ambassador to China from 2009 to 2012 and is now a distinguished senior fellow at the University of Toronto’s Munk School of Global Affairs. “There is an edge to Chinese diplomacy. They really do think they occupy the centre of the Earth,” he said. “It’s unpleasant sometimes to be on the receiving end of that, but you have to decide: Are we going to engage these folks and have a conversation with them or not?”

The Courage to Fight and Win: The PLA Cultivates Xuexing for the Wars of the Future | The Jamestown Foundation Since early 2013, the PLA has conducted a political campaign to cultivate xuexing (血性)—courage, or valor—in its soldier, sailors, and airmen. Prompted by instructions from Xi Jinping, this campaign has sought to ensure that the services exhibit the aggressiveness needed to defeat a powerful adversary. It was initiated due to a perceived lack of warrior spirit in the military. The PLA seeks to rectify inadequacies by changing service culture through political work and training. Understanding this effort sheds light on how Chinese leaders gauge the balance of power between China and potential foes.

Japan Protests Chinese Gas Platforms in E. China Sea Japan asserts that China now has more than a dozen gas development structures on the Chinese side of the median line, and as an EEZ has not yet been agreed, it is “regrettable that China is advancing unilateral development” in the area, the Japanese Ministry of Foreign Affairs said in a statement. It noted that China and Japan had agreed in 2008 to cooperate on development of the area’s natural resources.

Premier Li asks overseas Chinese to invest at home – Xinhua Li was speaking with delegates to the Eighth World Conference of Overseas Chinese Friendship Associations, extending greetings to more than 60 million compatriots overseas. Overseas Chinese have a strong sense of the culture and traditions of the motherland, and display the Chinese virtues of diligence, intelligence and inclusiveness in their achievements in other countries, Li said. The premier told the delegates that although China has become the world’s second largest economy in terms of GDP, there is still a long way to go on the road toward modernization.

HONG KONG, MACAO AND TAIWAN

Secret Phone Bets in Macau VIP Rooms Spark Laundering Risks – Bloomberg Hidden inside the private room of a Macau casino’s exclusive gaming area, a single player sits at a baccarat table. As the cards are turned, the man, a hired hand, gives a play-by-play account via an earpiece wirelessly connected to his mobile phone. On the other end of the call, hundreds if not thousands of miles away, is the real gambler — a player beyond the border in China. That was the scenario described by five people who work at Macau’s junket operators, which front money to high rollers and bet on their behalf using wireless headsets — in violation of the city’s May 9 ban on using phones at betting tables.

Xiaomi backtracks on Brazil-TechInAsia Nearly a year after Chinese gadget maker Xiaomi expanded to Brazil, its first market outside of Asia, the company is now rethinking its strategy. While Xiaomi will continue partial phone sales in Brazil, some team members will return to Beijing HQ, the firm has announced. Xiaomi’s phone manufacturing line at a Foxconn factory in Brazil is now in doubt as well.

China’s Great Firewall is Harming Innovation, Scholars Say | TIME At a scientific conference held late last month in Beijing, domestic researchers protested that the nation’s Internet restrictions are harming their ability to innovate. One unnamed Chinese academic told the China Science Daily that “it is very difficult to achieve world-leading results or to be a frontrunner in global scientific research without any knowledge of [other countries’ achievements] and without comparison.”

China’s government must pre-approve every single mobile game starting July 1-TechInAsia On Thursday, the government organ issued new rules that will take effect July 1st, requiring that all mobile games be submitted to SAPPRFT for pre-approval at least 20 business days before being put online. This is true, by the way, regardless of what kind of game you’ve made. The rules are even stricter if you’ve made a story-based game, especially one that touches on political or military topics.

China’s Ruling Party Continues to Tighten Grip on Internet Content-RFA Party members and government officials across China have been issued with forms requiring them to list any content on popular chat apps like WeChat and QQ that could go against government guidelines. The forms require the full details of any administrator of chatrooms on QQ or WeChat, as well as the group’s identification numbers, according to a copy of a form seen by RFA. A Beijing-based academic surnamed Jia said he had also seen the form posted in chatrooms. // this may be the form

SOCIETY, ART, SPORTS, CULTURE AND HISTORY

Should I Stay or Should I Go? | ChinaFile Conversation It’s graduation time, and Chinese graduates from American colleges are now pondering what to do next: return to China or stay in the U.S. We reached out to recent graduates to ask about their decision-making process and how they view their prospects at home and abroad. —The Editors

The Truth About China’s Missing Daughters | New Republic What this indicated to Johnson is that, were it not for official government suppression of Chinese adoption traditions, “nearly all relinquished healthy daughters in the 1990s could have found families who wanted them in China, leaving few healthy children available for international adoption.” That’s a significant finding. International adoption in the U.S. began to boom in the mid-1990s to mid-2000s in large part because of the adoptions from China, which at their heyday in 2005 included 8,000 Chinese children coming to the U.S. in one year (part of the 120,000 Chinese children adopted abroad in total, including more than 85,000 to the U.S., since 1991). The availability of thousands of healthy Chinese infants for international adoption had a transformative effect on the entire international adoption field

Xi’s Green Teams Fight for the Environment-Huffington Post Xi has turned his attention to the even more difficult task of delivering on those commitments at home. To do so, he’s taking a page from his anti-corruption campaign: creating “Green Teams” or environmental experts tasked with conducting random inspections across China to ensure that provincial and municipal leaders are actually implementing his policies. Xi’s Green Teams are a broader symbol of his challenges to implementing his domestic reform agenda, particularly enforcing local compliance of his national policies. While President Xi may have consolidated power at the national level, he still has tremendous difficulty ensuring that policies issued from the center are carried out consistently at the local level. As the Chinese proverb goes, “the sky is high and the emperor is far away.” And Xi’s environmental effort will fail if he cannot get local leaders in line.

EDUCATION

Chinese textbook’s Bible story prompts unholy backlash – FT.com The Bible has become the latest target of anti-western rhetoric in China after a backlash over a textbook that included passages from the Book of Genesis. The writers of the secondary-school book defended their use of the Bible’s creation story, saying they wanted to broaden students’ understanding of mythology by including a famous western tale, according to an interview in the Beijing Youth Daily, a state-run newspaper.

Foreign Students Seen Cheating More Than Domestic Ones – WSJ Students from China were singled out by many faculty members interviewed. “Cheating among Chinese students, especially those with poor language skills, is a huge problem,” said Beth Mitchneck, a University of Arizona professor of geography and development. In the academic year just ending, 586,208 international undergraduate students attended U.S. colleges and universities, according to the Department of Homeland Security. More than 165,000 were from China. South Korea and Saudi Arabia were the source of nearly 50,000 each and India of about 23,500.